Digging Yourself Out of Debt

You’re not alone. Millions of people are deep in debt and struggling to stay afloat. Whether your debt stems from the loss of a job, a family illness, or overspending…it can be pretty overwhelming. But no matter how deep of a hole you are in, there is usually a debt solution that can help you dig out.

Let’s talk about a few of your options.

Developing a Budget. The first step to taking control of your finances is to sit down and size up your situation. Make a list of all of your income and then make another list of all your expenses. If your expenses are more than your current income, you’ve got your work cut out for you. You need to ruthlessly cut out as many expenses as you can until you get your spending in line. You should also look for ways to increase your income (a part-time job, a side gig, etc).

Contacting Your Creditors. Gather up a list of all your bills and make a list of all your creditors, how much you owe them, the current interest rate, and how far behind you are on your payments. Give each of them a call and let them know that you’re having trouble making ends meet. Explain your situation to them and try to work out a modified payment plan that reduces your payments to a more manageable level. You’ll need to do this before the creditor hands your account over to a debt collector.

Credit Counseling. If you don’t think you can get out of debt on your own, consider contacting a credit counseling organization. A reputable credit counselor can help you develop a budget, teach you basic money management skills, and work out a personalized debt solution for you.

Debt Management Plan. Depending on your circumstances, a credit counselor might suggest you enroll in a debt management plan. In a debt management plan, you send money to the credit counseling agency each month and they use it to pay your bills for you through a payment schedule they work out between you and your creditors. They usually try to get your creditors to lower interest rates and waive certain fees as well. While a debt management plan might not be best for everyone, it is a viable option for people with serious debt problems.

Mike is a freelance writer and blogger who specializes in finance and parenting topics. He is a dedicated husband and father of three who is obsessed with creating multiple streams of income and building wealth so he can achieve true financial freedom for his family. Like what you're reading? Subscribe to our free RSS feed and follow us on Twitter.

Contacting your creditors is critical. In my debt experience, the fact that I contacted them all, explained the situation, and that I would pay as much as I could every month made all the difference. I didn’t even have to work out a formal plan – as long as I was sending money each month, on time, and the amount I sent kept going up as I paid off other bills, kept them happy.

Great, solid advice, Mike! I liked that you included making a budget as one of the first steps. If you can’t get a handle on where your money is going, actually staying out of debt once you get there seems unlikely.

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